Bonding

Bonding with Life DAO

What are Bonds?

Bonds refer to the process of trading Liquidity Provider (LP) tokens for LIFE tokens at a discount (below market price).

With LIFE, the process of purchasing bonds has been simplified to a one-step process. Instead of having to purchase the LP tokens then trading them for Bonds, users only need to have the asset-pair (USDT + LIFE) in their wallet to purchase the bonds directly.

Bonds are vested for 5 days and are paid out per block height. For example, if you were to purchase a bond, after the first day you would have received 20% of the vested amount; then 40% after the second day, etc.

Why Bond?

Simply, it allows you to buy LIFE at a lower cost basis. In return for selling your asset-pair (LP), the protocol will sell you LIFE at a discount. The idea here is that bonds will give you some amount more LIFE than you would have received if you had bought on the market and then staked. The amount of “how much more” will be determined by how many bonds there are already available.

Let’s walk through a bond example.

1. When the price of LIFE is $500, and you have $1,000USD. With that cash amount money, you are able to go and buy 2 LIFE and stake.

2. Staking will yield ~0.6% per epoch, and so during a vesting term (15 epochs), your stake will increase from 2 LIFE to 2.185 LIFE.

3. If the bond price is $450, instead of buying outright, you could buy 1 LIFE for $500, add 1 LIFE and $500 to the pool, and bond the liquidity share you got back for a locked in 2.22 LIFE.

4. Over the next five days, you can claim those LIFEs as they vest, until term completion and you have the full amount.

5. Strategy gets interesting when you factor in the rewards from the bond!

6. Before the end of each epoch, you could claim the accrued rewards and stake, which means you get both the discount and the staking rewards.

7. Or else you could, at the end of the term, add the 2.22 LIFE plus $1110 to the pool to get new LPs and create another bond.

8. Doing this will lower costs because you already got your LIFE at a discount and you’re now getting yet another discount on the next round.

9. In this strategy you can do both:

1. Claim rewards and stake before the end of each epoch,

2. Then when you’re done vesting, unstake everything and rebond!

Creating a Bond

Go to LIFE’s website and select the ‘Bond’ tab. The protocol will quote the LIFE amount and a vesting period for the trade. You would need to have the asset-pair (USDT + LIFE) in your wallet to purchase the bond.

Redeeming a Bond

On LIFE’s website, select the ‘Bond’ tab, then click on the submenu ‘Redeem’. The protocol will recall when you bonded and your vesting term. If you have any pending rewards, you can claim them. Rewards accrue throughout the vesting period.

Note: sLIFE is the protocol’s profit accruing token and since bonders earn LIFE (not sLIFE), stakers earn 100% of protocol profits (minus the DAO’s cut). See our staking article for more info.

Some key points on Bonding

Bonds give you the opportunity to buy LIFE from the protocol at a discount. Here are just a few differences to keep in mind:

1. You pay for LIFE with liquidity. This aspect helps the protocol accumulate liquidity shares.

2. NO LIFE up front. Instead, your LIFE is vested over the course of five days. This smooths out market impacts from the new supply of LIFE.

3. The demand for bonds will determine your discount. The bond discounts increase when there are more bonds, and decreases when there are less.

4. Once you bond, your LP commitment is locked. When you have executed a trade, you have made the trade. Think of it as buying LIFE and committing to stake for 5 days with a set reward rate.

Conclusion

Bonding not only allows users to purchase LIFE at discount, but can also be used as part of a multi-step investment strategy to compound yields.